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I did more research, and found that this is a known issue. The problem is caused by the fact that the %TMP% folder is not under C:\. Usually caused by the fact that users use Junction folder to move the profile folder to different partition. http://code.google.com/p/chromium/issues/detail?id=13044.

1) A workaround is to create a folder name "Temp" under C:\ // This step is important, the folder has to exist.
2) Right click the Computer in Start menu and select Properties
3) Click Advanced System Setting
4) In System Properties windows, click Advanced tab
5) Click Environment Variables button
6) Under User variables list, double click TMP
7) Change Variable value: from "
%USERPROFILE%\AppData\Local\Temp" to "C:\Temp"

I aven't changed the folder where Extensions are installed. In fact, I don't know where the extensions are installed. What I mean is that I were able to install several extensions in the past till yesterday, whe I got the error described.

I've renamed the Default folder as you said and still getting the same error.